Conflict of interest and links between business and politics at local level. Koncsik Anita Athens,

Transcription

1 Conflict of interest and links between business and politics at local level Koncsik Anita Athens,

2 Conflict of interest negligence or a hidden agenda? A delicate topic in today s Hungary: Benign interpretation: legislators treat the phenomenon with generosity and goodwill or Sceptic interpretation: legislation during the last few years has been institutionalizing a twisted form of state capture: Pattern (hypothesis): cronies of the reigning party alliance can benefit from tailor-made legislative amendments shaped to meet their personal needs Examples of the affected legislative pieces Act CXCV of 2011 on Public Finances Act XXXVI of 2012 on the National Assembly Act CXLIII of 2015 on Public Procurement

3 Landscape of local municipalities Municipal elections took place in the autumn 2014 where transparency NGOs conducted a joint research trying to estimate the real campaign cost of the parties (5:1)

4 Landscape of local municipalities As to the elections: no (comprehensive) regulation (at all) about spending limit or subsidies to parties and candidates from the central budget. Facts also showed that there was no strict distinction between state (governmental) and party campaign on local level Asset declarations of municipality council-members => every municipality regulates the issue itself Common (and legally accepted) practice: untouched, closed envelopes Local budget suffers from lack of transparency and is not easy to understand even for councilmembers Political finance shows strong correlation with public procurement corruption Danger: contracting authorities using public contracts as pay out hidden donors of political finance and sport finance issues

5 Anomalies around tenders of local municipalities? Regulatory loopholes in the pp act combined with tailor made procurements equals public contract worth more than 35 million EUR in 2 years

6 Anomalies around tenders of local municipalities

7 Anomalies around tenders of local municipalities Owner NP Owner NP Contributor A B Preparatory phase Tender C Winner

8 Anomalies around tenders of local municipalities Details: Paragraph 24 of the Act CVIII of 2011 on public procurement (relevant coi provisions): every contributor called in by the contracting authority can be excluded because of conflict of interest only when its (personal) contributions could result in distorting fair competition. Conflict of interest in the preparatory phase only could affect the contributing ventures and not their closely tied partners (vague exclusion criteria) Besides, the company was awarded (many times as a solely bidder) through tailor made procurement calls: specific references required by the contracting authorities (ia EU-funded projects as references) even the subject of the tender was overspecified by the tenderer in order to have one bidder with one particular subcontractor to fulfill the given requirements. This praxis inspired 2 of the indicators of the recently developed redflag IT-tool [

9 Procurement risk assessment in action redflags.eu Automatized Ex ante monitoring enabled Risk-forecast Not judging, weighing or validating Built upon a formal algorithm-system Pre-programmed filters used for scouring the wording of the procurement notices Customized combinations of filters Ex post refining of filters

10 uncertain quantity restricting geographical requirements EU-funded contract as a reference requirement of a reference performed within one contract timeframe to submit bids is too tight

11 Construction of red flags From 60 identified indicators more than 40 implemented [32 9] Contiguous updates (Tenders Electronic Daily) notices (contract notice, contract award, additional information) Thematic focus Compliance with the legal rules explicit breaches of the law loopholes, bad practice Other risk factors Cartel - NCA K-Monitor DB Users can subscribe to alerts

12 Redflag-system in action

13 Results - statistics

14 Indicator correlations the NIF study In the case of one contracting authority (amongst the top 10 spender) more than 50 cases showed the same pattern: The subject of procurement falls into an area of suspected cartel. Estimated value of work contracts is too high. Regarding contracted experts, too many years of professional experience is required. Geographical requirements are listed within the scope of technical-professional capacity. The required revenue from the subject of the procurement exceeds the estimated value of the procurement

15 Future plans Extending the scope of examined notices (Hungarian practice below EU-threshold) Targeting applicability in other EU Member States core indicators Machine (deep) learning for refining the components of tailor-made procurement calls Pattern analysis, sophisticated weighing Integrating other databases incl. data from the company register market share Interconnections described by thenetwork of K-Monitor

16 Future plans integrating other databases Databases - targeting excavation of conflict of interest: Data from the company register or interconnections described by thenetwork Company register (Ex) Owner Executive officer Member of SC A Contarct award B C Winner Contract notice Contributor (ID)

17 Regulatory see-saw with conflict of interest Amendments to the new act on Public Procurement Originally, immediate relatives of politicians and other high-level public officials were prohibited by law from taking part in public procurements as bidders. The amendments to paragraph 25 of the act enabled with retroactive effect for immediate relatives to enter into tender procedures - only excluding relatives living in the same household. Amendments to the act on Public Finances: 2014 => legally approved state aid to organizations that officially have ties to or had cooperation with political parties within 5 years =>Sports clubs and federations under the control of members of the government, state secretaries, deputy state secretaries, (lord) mayors, presidents of county councils or their immediate relatives do not fall under the scope of conflict of interest anymore and can be beneficiaries of state aid

18 Regulatory see-saw with conflict of interest Transparency implications of the sport subsidies The current corporate tax reduction system gives spaces to opaque lobbying (TI-Hungary) 1. sports clubs issue a certificate of subsidies, which entitles the donor companies to reduce their corporate income tax by the amount of the subsidy (1) 2. sports clubs are not obliged by law to publish a detailed report on the apportionment of the subsidies (2) 3. the identities of the donors can remain in the shadow and company offerings are treated as pure private donations (in spite of the fact that they stand by nature closer to public funds) (3) 4. biased selection of eligible sports clubs can be observed (4): Only 5 government selected spectator team sports can apply for subsidy => application for authorization at their respective sports federations in order to be eligible for subsidies. (eligibility process suffers from lack of transparency)

19 What people nowadays call corruption, is practically the most important policy of FIDESZ Chairman of the Board of Trustees of Századvég Foundation

20 Thank you!